Global Market Comments
March 25, 2022
Fiat Lux
Featured Trade:
(THE MAD HEDGE TRADERS & INVESTORS SUMMIT VIDEOS ARE UP!)
(MARCH 23 BIWEEKLY STRATEGY WEBINAR Q&A),
(QQQ), (TSLA), (BA), (DEER), (CAT),
(AAPL), (SLV), (FCX), (TLT), (TBT)
The Mad Hedge Summit videos are up from the March 14-16 confab. Listen to 24 speakers opine on the best strategies, tactics, and instruments to use in these volatile markets. It is a true smorgasbord of investment strategies. Find the best one to suit your own goals.
The product discounts offered last week are still valid. Start, stop, and pause the videos at your leisure. Best of all, access to the videos is FREE. Access them all by clicking here.
Below please find subscribers’ Q&A for the March 23 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley.
Q: What is the best way to keep your money in cash?
A: That’s quite a complicated answer. If you leave cash in your brokerage account, they will give you nothing. If you move it to your bank account they will, again, give you nothing. But, if you keep the money in your brokerage account and then buy 2-year US Treasury bills, those are yielding 2.2% right now, and will probably be yielding over 3% in two years, so we’re actually being paid for cash for the first time in over ten years. And, as long as it’s in your brokerage account, you can then sell those Treasury bonds when you’re ready to go back into the market and buy your stock, same day, without having to perform any complicated wire transfers, which take a week to clear. Also, if your broker goes bankrupt and you hold Treasury bills, they are required by law to give you the Treasury bills. If you have your cash in a brokerage cash account, you lose all of it or at least the part above the SIPC-insured $250,000 per account. And believe me, I learned that the hard way when Bearings went bankrupt in the 1990s. People who had the Bearings securities lost everything, people who owned Treasury bills got their cashback in weeks.
Q: Is the pain over for growth stocks?
A: Probably yes, for the smaller ones; but they may flatline for a long time until a real earnings story returns for them. As for the banks, I think the pain is over and now it’s a question of just when we can get back in.
Q: Why did you initiate shorts on the Invesco QQQ Trust Series (QQQ) and SPDR S&P 500 ETF Trust (SPY) this week, instead of continuing with the iShares 20 Plus Year Treasury Bond ETF (TLT) shorts?
A: We are down 27 points in 10 weeks on the (TLT); that is the most in history. And every other country in the world is seeing the same thing. That is not shorting territory—you should have been shorting above $150 in the (TLT) when I was falling down on my knees and begging you to do so. Now it’s too late. If we get a 5-point rally, which we could get any time, that’s another story. It is so oversold that a bounce of some sort is inevitable. I’d rather be in cash going into that.
Q: Do you think Tesla (TSLA) has put in a bottom, or do you still see more downside? Is it time to buy?
A: The time to buy is not when it is up 50% in 3 weeks, which it has just done. The time to buy is when I sent out the last trade alert to buy it at $700. This was a complete layup as a long three weeks ago because I knew the German production was coming onstream very shortly; and that opens up a whole new continent, right when energy prices are going through the roof—the best-case scenario for Tesla. And the same is happening in the US—it’s a one-year wait now to get a new Model X in the US. In fact, I can sell my existing model X for the same price I paid for it 3 years ago, if I were happy to wait another year to get a replacement car.
Q: Will the Boeing (BA) crash in China damage the short-term prospects? And as a pilot, what do you think actually happened?
A: Boeing has been beat-up for so long that a mere crash in one of its safest planes isn’t going to do much. It could have been a maintenance issue in China, but the fact that there was no “mayday” call means only two or three possibilities. One is a bomb, which would explain there being no mayday call—the pilots were already dead when it went into freefall. Number two would be a complete structural failure, which is hard to believe because I’ve been flying Boeings my entire life, and these things are made out of steel girders—you can’t break them. And number three is a pilot suicide—there have been a couple of those over the years. The Malaysia flight that disappeared over the south Indian Ocean was almost certainly a pilot suicide, and there was another one in Germany and another in Japan about 20 years ago. So, if they come up with no answer, that's the answer. It’s not a Boeing issue, whatever it is.
Q: Is John Deer (DEER) or Caterpillar (CAT) a better trade right now?
A: It’s kind of six of one, half a dozen of the other. Caterpillar I’ve been following for 50 years, so I’m kind of partial to CAT, and Caterpillar has a much bigger international presence, but that could be a negative these days in a deglobalizing world.
Q: Apple (AAPL) has really caught fire past $170. Should I chase it here or wait until it’s too overbought?
A: I never liked chasing. Even a small dip, like we’re having today, is worth getting into. So always buy on the dips.
Q: Is Silver (SLV) still a good long-term play?
A: Yes, because we do expect EV production to ramp up as fast as they can possibly do it. Too bad the American companies don’t know how to make electric cars—they just haven’t been able to get their volumes up because of production problems that Tesla solved 12 years ago. So, long term, I think it will do better, but right now the risk-on move is definitely negative for the precious metals.
Q: How low will the iShares 20 Plus Year Treasury Bond ETF (TLT) go in April before the next Fed meeting?
A: I think we’re bottoming for the short term right around here. That’s why I had on that $127-$130 call spread in the (TLT) that I got stopped out of. And I may well end up being right, but with these call spreads, once you break your upper strike, the math goes against you dramatically. You go from like a 1-1 risk profile to like a 10-1 against you. So, you have to get out of those things when you break your upper strike, otherwise, you risk writing off the entire position with 100% loss. As long as Jay Powell keeps talking about successive half-point rate cuts, we will get lower lows, and my 2023 target for the TLT is $105, or about $20.00 points below here.
Q: Do you think we retest the bottoms?
A: Absolutely, yes; it just depends on where the test is successful—with a double bottom or with a retrace of half the recent moves. Keep in mind that stocks go up 80% of the time over the last 120 years, and that includes the Great Depression when they hardly went up at all for 10 years, so selling short is a professional’s game, and I wouldn’t attempt it unless you had somebody like me helping you. You're betting against the long-term trend with every short position. That said, if you’re quick you can make decent money. Most of the money we’ve made this year has been in short positions, both in stocks and in bonds.
Q: Where can we find this webinar?
A: The recording for this webinar will be posted on the website in about two hours. Just log into your account and you’ll find them all listed.
Q: When should I sell my tradable ProShares UltraShort 20+ Year Treasury ETF (TBT)?
A: You don’t have an options expiration to worry about, so I would just keep in until we hit $105 in the (TLT). If you do want to trade, I’d take a little bit off here and then try to re-buy it a couple of points lower, maybe 10% lower.
Q: What do you think of a Freeport McMoRan (FCX) $55-$60 vertical bull call spread?
A: The market has had such a massive move, that I’m reluctant to do out of the money call spreads from here unless we get a major dip. So, don’t reach for the marginal trade—that’s where you get your head handed to you.
Q: Will yield curve inversions matter this time and foretell a recession?
A: I think no, because corporate earnings are still growing, and by the summer, we probably will have a yield curve inversion.
Q: There seems to be some huge breakthrough in battery technology where batteries could be recharged within four minutes. I believe it’s the Chinese who have the tech, if so how will that impact on Tesla?
A: Every day of the year someone presents Tesla with a revolutionary new battery technology. It either doesn’t work, can’t be mass-produced, or is wildly uneconomical. So, I’ll confine my bet that Tesla will be able to eventually mass produce solid state batteries and get their 95% cost reduction that way.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last ten years are there in all their glory.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Mad Hedge Biotech and Healthcare Letter
March 24, 2022
Fiat Lux
Featured Trade:
(A BIOTECH STOCK POISED FOR A REBOUND)
(MRNA), (PFE), (BNTX), (AZN), (JNJ), (NVAX), (GSK), (SNY)
Healthcare stocks have experienced an unusual run over the past few years. The sector was nearing scorching hot levels when the pandemic started, only to go ice cold by the end of 2021.
Nonetheless, seasoned investors in the sector know that solid companies will continue to grow at a steady pace despite the decline in their stock prices.
This is where the fun starts for some investors.
After all, we all enjoy a good bargain, especially when it comes to promising stocks. What makes it even more enticing is if the stock has a proven track record and solid prospects in its pipeline.
Based on these criteria, one name that readily comes to mind is Moderna (MRNA).
Since it reached its peak in August 2021, Moderna shares have fallen by over 60%. Despite these losses, the business is still regarded as one of the most promising companies in the sector. This means that the stock can recover soon.
Moderna is a significant mover in one of the hottest markets today: the COVID-19 vaccine sector. Since the pandemic started, the company has been able to generate billions of dollars in profit from its only commercialized product: mRNA-1273.
While the demand has been divided now due to the entry of other vaccine developers, Moderna still expects to earn at least $19 billion from its COVID-19 vaccine.
Before becoming a household name, not many people knew of Moderna’s existence. At that time, most weren’t even confident that the messenger-RNA vaccines would actually work.
In the early stages, Moderna was only rivaled by Pfizer (PFE) and BioNTech (BNTX) in this particular field. Meanwhile, the rest of the world was betting on other companies like AstraZeneca (AZN), Johnson & Johnson (JNJ), and even Novavax (NVAX).
As soon as the results came out, Moderna shares skyrocketed to unprecedented heights. In 2020, the company recorded a 434% growth.
However, recent times have not been as kind to Moderna. Investors now worry that this might be the reality, a.k.a. the post-pandemic sales.
This is far from the truth.
Admittedly, sales from the vaccine would dwindle over time due to competition and possibly even herd immunity.
In preparation for this eventuality, Moderna has been stocking up its pipeline. Recently, the company announced pivotal Phase 3 trials for two of its vaccine candidates.
One is for cytomegalovirus (CMV) and the other is for the respiratory syncytial virus (RSV).
Both candidates hold the potential to become blockbusters.
The RSV market is projected to become larger than initially anticipated, reaching roughly $10 billion. Given the promise of this sector, it comes as no surprise that Moderna has competitors. Sanofi (SNY), GlaxoSmithKline (GSK), and Pfizer are some of the biggest players here.
As for the CMV vaccine, the product has the potential to reach $2 to $5 billion in annual sales. Moreover, this program can be linked to other sectors like oncology and autoimmune diseases.
Other than these, Moderna has been developing its HIV vaccine. It already started with trials, with its first participant queued to receive the first dose of the experimental candidate.
This could be another massive revenue stream for Moderna as the annual spending on HIV is estimated to reach $500 billion globally.
Another candidate is Moderna’s flu vaccination program. However, this might be a more difficult path as the company faces strong challengers, including Pfizer, Novavax, and GSK.
In addition to these, the company is also working on Nipah and Zika vaccines. There are also plans for herpes simplex virus (HSV) and varicella zoster virus to join the roster soon.
Cornering the vaccine market is a good approach since Moderna has a tested and proven product dominating the industry today.
That is, no one is doubting the power and efficacy of mRNA-based strategy in vaccines.
More importantly, there is no question that Moderna is performing well in this field. This is an unshakeable and established strength that Moderna investors should be focusing on.
A seemingly unstoppable stock in the past few years, this company suddenly fell out of favor. Nevertheless, its prospects remain the same and it can still deliver significant revenue—something that’s expected to go on well into the future.
Mad Hedge Bitcoin Letter
March 24, 2022
Fiat Lux
Featured Trade:
(KICK THE CRYPTO CAN DOWN THE ROAD)
(BTC), (FED)
Federal Reserve Chairman Jerome Powell on Wednesday said digital innovation in the financial sector is here to stay and with it, a raft of new regulations will need to be created.
It’s interesting that he delves into the matters of cryptocurrency so succinctly when one might really question if he has a grasp on the current fiat monetary policy in the United States.
Many have also gone on record saying that he has committed a vast policy error by allowing inflation to run too high for too long.
There are elements that are true to this and observing his overly cautious stance to raising interest rates makes me deduce that he most likely will bring the same type of attitude to Bitcoin and cryptocurrency.
I agree that new regulations need to be created and the lack of them is holding cryptocurrency back, but at least Powell didn’t take the hostile route which he easily could have with nobody batting an eye if he turned more conversative to the technology of money.
Powell described cryptocurrency as a “novel technology like distributed ledger and decentralized finance which has the potential to improve the efficiency of the payment system and encourage a more competitive financial landscape.”
When I hear Powell say the word “novel,” it basically means that nothing of substance will take place in the near-term future because he is too experienced to deal with an emerging asset class that could potentially ruin his legacy at the Federal Reserve.
He could have even said that cryptocurrency is “exotic” and still gotten away with it.
Every Central Bank governor wouldn’t mind a more “efficient” and “competitive” financial system and fortunately, the American financial system is still the gold standard of the world even if the gatekeepers of the Central Bank currently aren’t performing up to snuff.
Powell also divulged that the Fed will likely collaborate with other central banks on other areas of crypto and financial innovation, including stable coins.
A stable coin is a cryptocurrency pegged to a reserve asset like a fiat currency, commodity, or other cryptocurrencies. It is a tokenized version of the asset and can be introduced subtly into a blockchain ecosystem to facilitate seamless pass transactions, improved arbitrage, and value exchange.
It is sometimes referred to as a utility token because it allows you to quickly buy and sell on decentralized exchanges that do not accept fiat currencies.
Stable coins are also used in centralized exchanges. What makes them useful in an exchange of this kind is the fact that fiat currencies take a long time to process, but their tokenized counterparts are standard blockchain entities that move quickly.
Powell also dives into the need for crypto to close the “regulatory gaps” which for me means that he wants crypto to be centralized just like the US dollar wields an army of bureaucrats in the form of regulators safeguarding the American financial system.
That might rankle a few crypto diehards who are hellbent on crypto being a decentralized system and not to mention when crypto looks like a safer bet, all the Wall Street influence that will pile into the crypto ecosystem.
Ultimately, Powell’s speech was good and bad for crypto.
Acknowledging it effectively means he legitimizes it, yet he doesn’t want it to develop without parameters in which the government has zero influence.
It is yet to be seen if the federal government just kills assets like Ether and Bitcoin to create their own digital currency would be the digital version of the US dollar.
That’s a page right out of the Chinese communist party with their digital yuan.
If that happens, many investors will cry foul and would be left scrambling.
However, I don’t believe Powell has the intention to crush a whole trillion-dollar asset class that could trigger contagion throughout the whole market.
By keeping it at arms’ reach, Powell effectively gave a green light to develop parallel to the US financial system yet kicking the can down the road to whether this monster can be integrated seamlessly into the US financial system or not.
That’s the end game for the likes of Bitcoin and crypto, but that decision has been put off for the long-term giving more time to this emerging asset class to improve its foundations.
To live to breathe another day is not necessarily a bad thing in speculative markets.
THE MAN WITH GREAT POWER OVER THE FUTURE OF CRYPTO
“Bitcoin is not a currency, it's not used as a medium of exchange really, or a unit of account. It's just used for speculation.” – Said American Investor Peter Schiff
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Global Market Comments
March 24, 2022
Fiat Lux
Featured Trade:
(TEN TECH TRENDS DEFINING YOUR FUTURE, or THE BEST TECH PIECE I HAVE EVER WRITTEN)
(TSLA), (GOOG), (AMZN), (AAPL), (CRSP)
